Just the Facts Ma’am

/in /by

Advocacy—Just the Facts Ma’am

So, we’ve already talked about the reluctance of a lot of non-profits to engage in advocacy and lobbying. A lot of this reluctance has to do with fear; boards and non-profit staff are afraid they’re going to lose their non-profit status if they engage in lobbying and advocacy. You’ll be fine If you follow the IRS 501c3 requirements.

As we’ve talked about before, there are no limits on advocacy. The one way to get in trouble is engaging in too much lobbying. Remember, not all advocacy is lobbying but all lobbying is advocacy. If you follow the rules below, you’ll do just fine.

Grassroots lobbying – “any attempt to influence any legislation through an attempt to affect the opinions of the general public or any segment thereof (IRS Code 501c3).” Exciting isn’t it? This form of lobbying sees agencies asking their supporters to lobby for a piece of legislation. For example, an agency that offers after school programming might send out an email asking supporters to urge their legislators or other government officials to support a budget increase for after school programming.

The financial limit on Grassroots (indirect) lobbying allows an agency to spend up to 25% of its total lobbying budget. Here is where it gets a little tricky. The 25% limit remains true whether or not an agency undertakes any direct lobbying. So, even if your agency can legally spend $100,000 in total lobbying but doesn’t spend any money on direct lobbying, you can only ever spend $25,000 on grassroots lobbying.
(Center for Non-Profits:http:// www.njnonprofits.org /NPsCanLobby.html).

Direct Lobbying–In general, organizations will not qualify under section 501(c)(3) status if a “substantial part” of its activities is lobbying. A 501(c)(3) organization may engage in some lobbying, but not too much (If you can figure what this means, please let us know).

Again, the primary difficulty with this regulation is that it doesn’t define “substantial part.” So, an agency that choses to operate under the “substantial part” test is is almost operating in the dark, taking a risk that the IRS will determine if it has crossed an undefined line. And the IRS aren’t the most forgiving of people—they don’t really care if you’re making the world a better place. There is an option, however, that stops you playing a game of chicken with the IRS.

The “H” Election–The 501(h) election, or ‘H Election’ mandates a series of specific limits on lobbying expenditures based on the Exempt Purpose Expenditures of an agency. These limits are measured as a percentage of an agencies total budget. No agency, regardless of its size, may spend more than $1,000,000 on lobbying. The limits are below in Table One.

TABLE 1

Lobbying nontaxable amount is≤ $500,000

Agency can spend  20% of the exempt purpose expenditures

If amount of exempt purpose expenditures is >$500,00 but ≤ $1,000,000
Agency can spend: $100,000 + 15% of the excess of exempt purpose expenditures over $500,000

If amount of exempt purpose expenditures is >$1,000,000 but ≤ $1,500,000
Agency can spend: $175,000 + 10% of the excess of exempt purpose expenditures over $1,000,000

If amount of exempt purpose expenditures is >$1,500,000 but ≤ $17,000,000
Agency can spend: $225,000 +5% of the exempt purpose expenditures over $1,500,000

If amount of exempt purpose expenditures is over >$17,000,000
Agency can spend: $1,000,000.00 of the exempt purpose expenditures.

(*Any amount a 501c3 spends to support it 501c3 status—does not include certain expenditures related to exempt purpose activities. These activities include some fundraising; some capital campaign work.)

So, there you go. Advocate away, do as much was you want. For lobbying, you can play chicken with the IRS, or chose the H Election and know what you can spend your money on and how much you can spend.